Some managers dislike programs

FREQUENT FLIERS

PHILADELPHIA -- Randy Petersen, probably the nation's leading independent authority on airline frequent-flier programs, has some good news and some bad news about the plans that offer travelers free trips and other rewards.

But, interestingly, the good news and the bad happen to be the same: Rewarding frequent travelers for their loyalty is here to stay, according to Mr. Petersen, editor and publisher of Frequent, the leading newsletter on the bonus programs.

The program's continuing popularity is good news for harried business travelers, who believe they deserve the rewards to compensate at least partially for all the time spent away from home and for the aggravation of air travel, Mr. Petersen said.

On the other hand, many corporate travel managers, who are trying to control the soaring cost of air travel, blame the programs for helping drive up air fares, he said. Mr. Petersen spoke recently at a seminar sponsored by Travel One Corp., one of the region's major travel agencies.

Many travel managers indicate in surveys that they resent the bonus programs. They believe the programs prompt traveling employees to take unneeded trips to build up mileage and spend valuable work time keeping track of their bonuses, Mr. Petersen told audience members, most of whom were travel managers.

Many managers also dislike programs developed by hotel chains to reward loyal guests, he said, because they believe the programs encourage travelers to stay in more expensive lodgings.

"Frequent-traveler programs are the devil and the angel," Mr. Petersen said.

Because of their cost -- both to the airlines and to companies paying travel bills -- there have been numerous predictions of the demise of the popular bonus programs since they were introduced almost a decade ago.

But the programs are still around for several good reasons, said the newsletter publisher.

Most basic is their popularity: 23 million individuals hold a total of 79 million memberships in airline and hotel clubs. Some programs are continuing to recruit members, adding 100,000 new ones per month, he added.

Also, neither the airlines nor the IRS, which has considered trying to tax the programs' benefits as income, can decide how to value the free tickets. The airlines note that three-quarters of all mileage built up in their programs goes unredeemed, which raises a question about taxing the mileage. If it is taxed, should it be when it is earned or when it is used? And should a free ticket be priced at the $1,000 full-fare level or as a $300 super-saver?

Mr. Petersen advised the travel managers to be extremely careful about trying to take away any awards employees have already earned.

Many business travelers regard their frequent-traveler bonuses as a savings account, to be used for trips when they have more leisure time after retirement.

One company that tried to recover benefits earned by its travelers -- by charging them a penny for every dollar in free travel they had earned -- had a revolt on its hands. Twelve people, including four executives, quit rather than give up the mileage. One calculated that it would cost him $12,000 to comply with the new policy, Mr. Petersen said.